PBM contracts can promise transparency, competitive pricing, and aligned incentives, but how can a plan sponsor know those commitments are actually being met? The answer is independent audit rights.
Audit rights are one of the most important, yet often overlooked, protections in a pharmacy benefit contract. While pricing guarantees and rebate language often receive the most attention during negotiations, a contract is only as valuable as a plan’s ability to verify that its followed.
Without meaningful audit rights, employers may be left relying solely on reports generated by the PBM itself. Strong audit rights give plans the ability to validate performance, identify discrepancies, and create accountability throughout the life of the contract.
Below are five ways audit rights help your plan verify your PBM is doing what it says, and what your contractual audit rights should include.
1. Verify Financial Performance
One of the primary reasons for an audit is to confirm that financial terms are being met. Independent auditors can review whether contracted discounts, administrative fees, guarantees, and other pricing is accurate. Rather than relying on summary reports, employers can be confident that the numbers reflect actual performance.
2. Confirm Rebate Accuracy
Whether you like them or not, right now manufacturer rebates and other forms of manufacturer compensation represent a significant source of value for many pharmacy benefit plans.
Independent audit rights allow plans to verify:
- All eligible manufacturer payments were received
- Appropriate amounts were credited back to the plan
- Rebate calculations align with contractual definitions
- Payments were made within required timelines
Without audit access, plans may have little visibility into whether all contractual rebate obligations have been fulfilled.
3. Identify Pricing Issues
PBM pricing is complex, meaning pricing issues can go unnoticed without detailed claims-level data.
An independent audit may uncover issues such as:
- Incorrect ingredient cost calculations
- Dispensing fee discrepancies
- MAC pricing concerns
- Claims that were not priced according to contract terms
Even when discrepancies are unintentional, identifying them early helps protect plan assets and improve future performance.
4. Validate Clinical Programs
Financial accuracy is only part of the equation. Employers also derive value from the PBM’s clinical programs. Audit rights can help verify that programs are operating as intended by reviewing whether:
- Prior authorization criteria are applied consistently
- Formulary management follows contractual requirements
- Step therapy protocols align with agreed-upon clinical strategies
- Appeals and coverage determinations are administered appropriately
This helps ensure clinical decisions remain aligned with both plan objectives and member care.
5. Ensure Data Integrity
Reporting drives strategic decisions. Whether evaluating utilization trends, specialty drug spend, or clinical outcomes, employers rely on accurate data to guide benefit strategy.
Independent audits provide confidence that:
- Claims data is complete and accurate
- Financial reports reconcile appropriately
- Performance metrics reflect actual plan experience
- Trend analyses are based on reliable information
Better data ultimately leads to better decision-making.
What Strong Audit Rights Should Include
Not all audit provisions provide meaningful protection. Some contracts contain restrictions that significantly limit a plan’s ability to verify performance. Effective audit provisions should include:
- The right to use an independent third-party auditor selected by the plan
- Access to detailed claims-level data and supporting documentation
- The ability to review rebates, manufacturer compensation, pricing methodologies, and applicable financial records
- Reasonable lookback periods covering multiple years
- Clearly defined timelines for providing requested information
- Meaningful remedies if discrepancies are identified
Real Transparency Allows Real Verification
Transparency isn’t simply receiving reports, it means having the ability to verify that your PBM is delivering what the contract promises.
At SlateRx, our clients have the right to conduct independent audits with meaningful access to the data needed to validate our performance. In addition, we hire an independent team to perform an audit regardless of whether a client chooses to conduct one, and we share those results. Combined with annual market checks and our willingness to serve as a pharmacy benefit fiduciary for the services we provide, it’s part of our commitment to accountability, transparency, and putting our clients’ interests first.
